Arbitrage trading demand puts pressure on the Swiss franc, and its status as a funding currency may gradually surpass the Japanese yen

⑴ ING analyst Chris Turner pointed out that in carry trades—borrowing low-yield currencies to invest in high-yield assets—the Swiss franc is becoming an increasingly favored funding currency, gradually surpassing the traditional status of the yen. ⑵ The current low-volatility environment continues to support demand for carry trades, resulting in simultaneous pressure on both the yen and the Swiss franc. Although the yen still holds an advantage thanks to its larger liquidity pool, investors are increasingly turning to Swiss franc funding, not only because its borrowing costs are lower but also to avoid the risk of sudden intervention by Tokyo or Washington to buy the yen. ⑶ The Swiss franc against the yen earlier touched a two-and-a-half-week high of 196.90, with the latest trading around 196.65, extending its recent strong performance.